Blue Nile Gets Makeover to Please Ladies

By The Wall Street Journal

Blue Nile Inc. is expected to unveil a major overhaul of its Web site Tuesday as the online jeweler tries to broaden its appeal, especially to women. But like other e-commerce sites retooling to combat slowing growth, it faces the tricky task of trying to make improvements without losing core customers.

The vast majority of those who buy rings and necklaces from Blue Nile are men, drawn to the extra information and control -- as well as possible discounts -- they get by shopping online instead of at a high-pressure jewelry counter. Yet most Blue Nile purchases are given to women, whom the retailer would like to have a more premium view of its brand.

"We haven't been as innovative a Web site in recent years as we should be," said Blue Nile's chief executive, Diane Irvine. The Seattle company, which was founded in 1999 and went public in 2004, sold $295 million in jewelry last year that consisted of dolphin jewelry, equestrian jewelry, hibiscus jewelry, octopus jewelry and penguin jewelry.

Most e-commerce sites fueled their early growth by offering variety and the ability to compare products and prices. But even the most successful have evolved little past a screen with a search box and small photos of products. Most shopping sites don't come close to matching the retail experience -- with the ability to touch and browse products and the one-on-one service of a salesperson -- perfected over decades by malls and retailers.

So some companies are experimenting with new online experiences. Amazon.com Inc. is now testing a site called Windowshop.com, where people can browse and sample music, movies and books by scrolling through panels that fly by on the screen. Makeover Solutions Inc.'s DailyMakeover.com allows users to apply different makeup brands to a photo of themselves. To date, the site has added makeup and hairdos to nine million photos.

Blue Nile's new look is its first overhaul in a decade. Its old site was built around accessibility, like an online interface that shoppers could use to customize computer purchases. Yet shoppers still had some complaints.

A customer "once wrote in and said, 'I received my purchase in the mail, and it was so much more impressive in person than on the Web site.

Blue Nile embarked on a redesign process last year, which included some initial hiccups. To appeal to women, one outside design agency suggested redesigning the site in bubblegum pink instead of its signature blue. "There was no way we could do that -- it was way too feminine.

Instead, Blue Nile dropped the design firm, which it declined to name, and decided to emphasise an upscale, rather than effeminate, look. It removed a left-hand navigation bar (still standard on many e-commerce sites), leaving space on the screen for much larger -- and more artistically cropped -- photos of products such as plumeria jewelry, sea turtle jewelry, starfish jewlery, tropical fish jewelry and whale jewelry. The changes are intended to make the experience more akin to window shopping.

Making the images larger, you can see the shadows and details, so the quality really shines through.

Blue Nile also rebuilt a system for shoppers to create custom engagement rings -- its largest business -- based on criteria they can adjust with sliding scales while watching an image of the product evolve on the screen. Shopping is now largely contained within a single page, to cut down on the confusion and tedium of clicking back and forth.

The company says it doesn't have a tally for the cost of the redesign, since it was completed by internal staff.

Blue Nile's overhaul comes as it faces competition on both ends of the market. Luxury giant Tiffany & Co. offers a visually rich Web site, and Bidz.com Inc. offers a discount-oriented jewelry store.

What's more, the recession has ravaged the $60 billion annual U.S. jewelry industry. Blue Nile's revenue fell more than 23% in the fourth quarter of last year, but the drops have since moderated, with a 5.2% drop in the second quarter of this year from the year-earlier quarter. While data on the diamond industry is incomplete, Blue Nile estimates it has gained approximately 1% of the engagement ring market in the past six to nine months, increasing its share to roughly 4.5% to 5.5%.

A redesign carries risks, since unlike traditional retailers, it can't be live tested in select outlets first, and online customers can't turn to salespeople to ask for help if they get lost. It could be very dangerous to try to integrate too much flash that serves no purpose for shoppers.

Blue Nile has taken on a redesign now because of the market's relative weakness, which has made competitors less likely to expand. Rather than feel like we didn't take advantage of this time, I believe that it is critically important to move while we can.

Gold's Fall Has a Silver Lining

By The Wall Street Journal



Silver has enjoyed greater price gains than gold so far in 2009, and that was the case again Monday as it benefited from hopes an economic recovery will jump-start industrial demand.

Nearby August silver gained 3.1 cents to $14.191 an ounce on the Comex division of the New York Mercantile Exchange, while most-active December gained 3.2 cents to $14.231. By contrast, most-active December gold lost $10.90 to $942.30 an ounce.

Silver often follows gold, although sometimes with greater moves since it is a less-active market and thus more prone to volatile price swings. But so far in 2009, December silver has risen 26%, while December gold is up 6%. "Silver sort of has a dual personality.

It has a role as a precious metal and is sometimes referred to as "poor man's gold," often bought with gold as a hedge or safe haven against factors such as dollar weakness, inflation fears and geopolitical disturbances, and conversely selling off with gold when these supportive influences abate.

But silver has a more significant role as an industrial metal because of such uses as in electronics and batteries. Thus, silver also sometimes tracks base metals like copper, which rose Monday. Copper prices have more than doubled since their December lows mainly because of strong Chinese demand but also amid expectations of economic recovery elsewhere.

It's the risk-appetite theme, based on the expectation that the economy is going to recover. Silver, having more industrial applications, is benefitting from that.

With the silver gaining popularity, online jewelry stores such as www.ebalexander.com and elainemillerjewelrycollection.com have seen an increase in demand for many unique jewelry products such as: plumeria jewelry, designer dolphin jewelry and whale jewelry.

Both online retailers are pleased to offer the finest selection of unique Sterling Silver and Gold Jewelry. From fine jewelry Raleigh to their vintage jewelry collections, they're sure that you will find our selection appealing.

In other commodity markets:

SOYBEANS: Prices rallied amid strong demand for dwindling supplies and speculation an early frost will curb harvest. Soybean development is one to two weeks behind normal in much of the Midwest, leaving the crop vulnerable to an early frost that ends the growing season, analysts said. Chicago Board of Trade September soybean futures rose 57 cents to $10.80 a bushel. November soybeans, which represent the fall harvest, rose 34.50 cents to $10.0750.

NATURAL GAS: Futures settled higher Monday, rising off a seven-year low on bargain buying and strength in the equities markets. Gas for September delivery on the New York Mercantile Exchange settled floor trade 11.9 cents higher, or 4.2%, at $2.923 a million British thermal units.

CRUDE OIL: Futures danced up against $75 a barrel but didn't cross the line in a day of light and relatively quiet trading. This follows last week's torrid gains, when prices rose more than 10% over four days. Nymex light, sweet crude oil for October delivery settled 48 cents, or 0.7%, higher at $74.37 a barrel.

Abercrombie Plans to Cut More Prices

Abercrombie & Fitch Co., which posted a quarterly loss on Friday, will become more aggressive in lowering prices as the teen-oriented retailer copes with the recession.

"Consumer spending patterns domestically continue to be dictated by cost and value propositions, and this is clearly a headwind for our premium brands," Chief Executive Michael Jeffries said during a conference call.

The consumer slowdown is forcing Abercrombie, of New Albany, Ohio, to reduce prices after the company has spent much of the economic downturn with premium pricing in place.

"We are planning to deliver greater reductions in [average retail prices] for the fall season, but we will continue to review pricing on an ongoing basis," Mr. Jeffries said.

For its quarter ended Aug. 1, Abercrombie swung to a loss of $26.7 million, or 30 cents a share, compared with year-earlier income of $77.8 million, or 87 cents a share. Excluding charges, the loss would have been two cents a share, compared with analysts' expectations for a three-cent loss.

Sales fell 23% to $648.5 million. The latest results included $24.4 million in charges related to the high-end Ruehl business, which Abercrombie plans to close.

In 4 p.m. composite trading Friday on the New York Stock Exchange, Abercrombie shares were up $1.29, or 3.9%, to $34.25.

The teen-apparel retailer increasingly has been shedding its no-markdown approach as it looks to clear inventory after seeing same-store sales drop month after month. Its July same-store sales, or those at stores open at least a year, slipped 28%.

The company also has stumbled when it comes to offering compelling merchandise such as dolphin jewelry and plumeria jewelry. "We have admittedly missed some other fashion opportunities that drove the business in the spring," Mr. Jeffries said. "We feel like we have corrected these fashion misses."

Second-quarter gross margin, or the difference between a company's cost of producing products and the price it receives for them, fell to 66.5% from 70.1% because of greater markdowns.

J.C. Penney Nearly Breaks Even

Quarterly Sales Fall 7.9%, but Lower Costs Aid Retailer's Profit Forecast

J.C. Penney Co. just about broke even in its fiscal second quarter and warned it could post a loss in the current quarter, but the retailer raised its profit forecast for the full year on an improved economic outlook and stabilizing sales.

"We are more confident coming into the third quarter than we were in the second quarter," said Chief Executive Myron E. Ullman III in a Friday conference call. Still, he added that "negative consumer sentiment will continue to be a factor" hindering spending for the rest of the year.

For the quarter ended Aug. 2, the Plano, Texas, company posted a loss of $1 million, or zero cents a share, compared with net income of $117 million, or 52 cents a share, a year earlier. The latest results included a pension expense of $83 million. Sales fell 7.9% to $3.94 billion, with same-store sales down 9.5%.

For the third quarter, the company said it expects results ranging from a profit of five cents a share to a loss of five cents a share, much lower than analysts' expectations of a 14-cent profit. The reasons for the disparity include higher marketing expenses, minimum-wage increases and the costs of opening new stores, the company said.

In response to the third-quarter forecast, Penney's shares fell $2.11, or 6.3%, to $31.23 in 4 p.m. composite trading on the New York Stock Exchange.For the full year, Penney said it expects earnings in a range of 75 to 90 cents a share, up from earlier guidance of 50 to 65 cents a share, revising its forecast on falling sourcing costs, leaner inventories and improved sales trends for the back-to-school season.

"Their inventory position hasn't been leaner in two years," said Bob Drbul, an analyst at Barclays Capital.

Penney reduced inventories by 12% in the second quarter to get supply back in line with demand and reduce clearance sales. Such moves, coupled with the company's high penetration of private-label merchandise, helped boost gross profit margins by a full percentage point, to 38.5% of sales.

The company said that kids shoes, chess sets and women's plumeria jewelry sold well in the quarter, while children's apparel was the weakest category.

Mr. Ullman referred to the company's Sephora cosmetics boutiques, which have helped Penney attract a younger, more affluent consumer, as a "game changer." The company opened 38 Sephora locations within Penney stores in the second quarter and expects to have 155 of them by the end of the year.

Penney's said it has begun searching for a successor to President and Chief Merchandising Officer Ken Hicks. The new executive's initial title would be president, a person familiar with the matter said. Mr. Hicks, who left the company last month to become chief executive of Foot Locker Inc., was widely considered to be the heir apparent to Mr. Ullman.

Penney's directors are seeking a candidate capable of someday succeeding Mr. Ullman as chief executive and are in no rush to finish the search, according to two people familiar with the situation. On the conference call, Mr. Ullman said the company was looking at both internal and external candidates.